Business Valuation and Due Diligence

Business Valuation

Business valuation is a process and a set of procedures used to estimate the economic value of an owner’s interest in a business. The type of business valuation required on an assignment is contingent on the purpose of the engagement.

Businesses or their assets are valued for a variety of reasons. Some of the more common purposes for valuation are:

Mergers and acquisitions

Litigation and ownership disputes

Shareholder oppression cases

Financial reporting

Goodwill valuation & impairment

Buy/sell agreements

Family limited partnerships

Reorganizations and bankruptcies

Recapitalizations

Business planning

Inheritance

Compensation

Value is driven by assets and liabilities, income, management, location, and all these factors make a business unique. Value can exist in assets which would not be tangible in nature, in different classes of equity and different types of debt. Understanding what drives value and where value exists is paramount in making informed decisions. Our services help to identify value in your business.

Organizations need clarity about fair value of its assets or business for a variety of reasons.

Our experienced professionals will do an insightful analysis and careful review of the facts, also, they have excellence in accounting and financial due diligence to provide you with valuation advice for a multitude of purposes.

Due Diligence

Due diligence is an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations.

The purpose of due diligence in an acquisition is to ensure that the acquirer fully understands the key risks around the property or business that it is buying, by assessing and validating assumptions that underlie the deal, giving the acquirer a coherent overview of the financial position and obligations, and providing the acquirer with valuable information to support negotiation of the purchase consideration

Alternatively, it is the caution the company should take before entering into an agreement or a transaction with another party and requires continuous force to ensure all financial records and relevant information are reviewed, analyzed and verified in a professional manner. It should facilitate the relevant parties to understand fully the business of the target company and to identify and address any material areas of concern.

At the property level our review can give comfort on areas such as onerous lease covenants, termination provisions, rent reviews and the impact of other lease provisions on cash flows. We can review arrears, tenant covenants, service charges, planned capital expenditure, reports on title, and surveyor's valuations. We can also develop or review the cash flow models you use to assess the economics of the acquisition.

Effective acquisition due diligence of a business ensures that the purchaser fully understands the drivers behind the past investment history and performance, property valuations, rental streams and service charges, title deficiencies and profitability and that areas are identified which may require costs to be incurred in performing post-deal rectification.

Many clients also ask us to undertake reviews before they commit to a sale of a property or business. The purpose here is to alert the client to issues that a potential acquirer may raise, thereby giving time to respond to and deal with those issues. Experience shows that vendor assistance can significantly speed up the disposal process and help to maximize the sale proceeds.

All businesses involved in acquisition or mergers as buyers or sellers must ensure that all financial information exchanged are verified and accurate, not only to prevent the buyers from paying more than the purchase price (or in the seller’s case, receiving less than the asking price), but also to ensure that their governance and risk management objectives are fulfilled.

The need for transparent and robust valuations to support corporate transactions and to meet regulatory and accounting requirements has increased in the modern business world. But justifying the value of assets and liabilities has grown more complex and critical for most businesses.